I find it as an honor to contribute to the ongoing campaign by the Federal Government on Food Security in relation with an operational commodity exchange as the ultimate solution to the envisaged food crisis in Nigeria.
First and foremost, the courageous move made by the Federal Government in identifying food security as key focal point of this administration is commendable as well by its action of October 17, 2023, of which the Federal Ministry of Agriculture was renamed to “Federal Ministry of Agriculture and Food Security”.
For the piece to be comprehended easily, the reader needs to understand some technical terms used in this text, these terms are:
Food Security as described by the World Food Summit in 1996 is “when all people, at all times, have physical and economic access to sufficient, safe and nutritious food that meets their dietary needs and food preferences for an active and healthy life”
Commodity Exchange is described by J. F. Pyle – “specialized organized markets which provide a place where their members buy and sell commodities or contract for future delivery under established rules and regulations.”
Warehousing System is “an act of storing goods that will be sold or distributed later.”
Warehousing Receipt System is “a process where owners of commodities deposit their commodities in a certified warehouse and are issued with documents known as Warehouse Receipt as proof of ownership.”
The primary responsibility of every government is to provide the needed physical and social security (food security inclusive) for its citizenry. The stability of the political system depends on how accessible the common man can have access to his/her primary needs such as foods.
Food Security is fundamental to the stability of every nation. History have it on records that several governments/regimes were brought down to their knees due to their inability to secure and provide food security to their citizenry. For the common man on the streets, having access to food is primary of which failure to do so can lead to so many social vices resulting to governments to spend more on security systems/apparatus across the board.
From the history perspective, several governments were over thrown due to their inability to secure and made foods easily accessible for the citizens. The most prominent event is the French revolution of 1700s BC tagged as “Let them eat cake” attributed to Queen Marie-Antoinette of France.
Several scholars and politicians have been calling the attention of this regime of President Bola Ahmed Tunibu to as a matter of urgency deploy the needed resources (financial and enabling policies) towards agriculture based economy. Transforming the agricultural sector of the economy will for sure create a new dawn of financial activities to citizens at all levels. This will encourage other levels of governments (State and Local Governments) to give special attention to the agricultural sector to serve as new source of revenue as well reduce the dependence on allocations from the Federations Accounts (FAAC).
Amongst the scholars, the President African Development Bank said:
“Nigeria must also make agriculture a major wealth creating sector. It is time to take bold policy measures to drive the structural transformation of agriculture, with infrastructure and spatial economic policies that will help turn the rural economies of Nigeria away from being zones of economic misery to new zones of economic prosperity.” – Dr. Akinwumi A. Adesina, President, African Development Bank Group, Business Day CEO Forum, 13 July 2023, Lagos, Nigeria.
The policy direction of the PBAT government on food security has positively attracted the attention of the business communities from both local and international market players. Some of the news headlines are:
Food Security: Saudi Arabia to setup farm equipment manufacturing plants in Nigeria – Abubakar Kyari, Minister of Agriculture and Food Security;
World Food Programme (WFP) partners Nigeria, others to kick start food assistance program, targets 7.5million people;
Italian Development Organization Cassa Depositi e Prestiti S.p.A. (CDP) signs 100million Euros MoU with Afrexim Bank to support food security in Africa;
Food Security: US invests almost $200million in Nigeria’s agric sector in five years;
Lagos State Governor, Mr Babajide Sanwo-Olu and his Niger State counterpart, Hon. Mohammed Umaru Bago signed a Memorandum of Understanding on the Produce-For-Lagos initiative;
South West governments arrive at 8-point resolutions to boost food production;
China to increase agricultural imports from Nigeria after FG’s N572 billion exports to Asia;
Food Crisis: Lagos Commodity and Futures Exchange urges Federal Government to utilize Commodities Exchanges for Food Security.
The cheapest, easiest and fastest route for successful implementation of food security policies in Nigeria is by having an operational commodity exchange (commex). Commex is to serve as catalyst by proving an organized platform for trading with warehouse receipt document. The utilization trading documents eliminate cost of moving the physical goods (farm produce) from one spot market to another. Transaction process (buying and selling) is instant, buyer will be debited and seller gets value with ease making the system transparent and reliable.
The transparency and reliability of transactions system within the commex operations will inspire business entities to venture into warehousing activities. Availability of warehousing operations will encourage farmers to produce more, since the fear of post-harvest lost is taken over by professionals (warehouse operators/insurance firms).
It has been a known fact that major factor limiting farmers to produce maximally is the post-harvest lost fear attributed to lack proper storage facilities to accommodate the excesses produced.
The United States Agency for International Development (USAID) has stated that about 50% of fresh agricultural produce is lost at the post-harvest stage. Such losses are partly responsible for the rising food inflation in the country which reached 40.01% in March 2024.
With the existence of an operational commex, the process and funding for the food security operations will mainly be financed and shouldered by the private sector of the Nigerian Economy since it is a promising venture with a guaranteed Returned on Investment (RoI). The former Economic Advisor to President Musa ‘Yaradua (Late), Mallam Tanimu Yakubu Kurfi delivered a lecture in which he highlighted the relationship between Commodity Exchange and Agricultural value chain as:
“Commodities Exchange is the ultimate accomplishment for agricultural production, process and distribution.” – Mallam Tanimu Yakubu Kurfi
Operational Commodity Exchange can serve as a catalyst for not only food security but to the economic, social and infrastructural developments of the Country. Furthermore, the platform of the Commodity Exchange can be utilize to encourage farmers and investors to collectively join force for more food production by transforming the traditional farming process to mechanized one. This transformation will have a positive impact to having sustainable food security and wealth creation among citizenry.
Other economic sectors the transformation will directly or in-directly develop are:
- farmers/investors to produce/invest more based on assured returns;
- farmers will be relived from post-harvest exposer since the risk of storing their harvest is being handled by professionals (warehousing operators and insurance companies);
iii. with increase on activities at the floors of the exchange more transactions (buying/selling) will be formalized resulting to increase government earnings on tax;
- increase on production from the agricultural sector (food security operations) will result to demand for more labor thereby engaging our teaming youths that are latent security threats our common peace;
- engaging our teaming to agricultural value chain and production circle will significantly reduce expenditures on security, since the perpetrators are meaningfully engaged;
- reduction on security expenditure will give authorities chance to channel such resources for other developmental projects;
vii. with creation of jobs, wealth creation amongst citizens will as well be enhanced;
- peace and stability within the Country will encourage foreign investors to invest into the other sectors of the economy; and
- will serve as catalyst for the governments (Federal and States) to achieve the desired results of the Sustainable Development Goals (SDGs)
The commendable wisdom and vision of the Federal Government towards having sustainable food security in the country should not be allowed to be disrupted with conflicting policies or actions by other agencies or state governments. The recent invasion of Dawanau Spot Market by the Kano State Anticorruption Agency is a misguided approach of which this action partly contributed to the escalation prices of staple foods in Nigeria. Taking the history line Dawanau Grains Market (spot market) has been in existence for over 50years and it serves as major source of staple foods to the entire West African Sub-Region. In an interview conducted and reported on November 7, 2018 by one of the national dailies stated that the market dispenses on daily basis about 50 – 70 trucks of assorted grains for local consumption and 100 – 150 trucks to other African countries.
The marketers at Dawanau source the staple foods through some of their identified agents across the African region to source for the grains and transport it to the market for proper storage and preservations. The spot market has become a house hold name for donor agencies for assured and guaranteed huge supply of grains to the needy countries in Africa and beyond that needs prompt assistance in cases like famine, flood, war torn countries, etc. The market also serves as a price determinant entity, the higher the stock they have in their warehouses the lower the prices and vice versa. They are operating just like the American Oil reserve, which determine the global oil/energy price. The Dawanau Market invasion by the Anticorruption Agency prompted the marketers not to replenish the dispensed goods due fear of being charged/accused of hoarding staple food, their actions resulted to unforeseen shortages in the supply chain of grains across the country.
There are three major spot markets in Nigeria namely Dawanau, Kano, Bodija-Ibadan, Oyo and Gombe, Gombe.
In conclusion, an operational Commodity Exchange is the secret behind the success route passed through by the developed nations as rightly shared by Chuck Kowalski:
“It’s unlikely that the United States of America (USA) would have experienced as much economic growth in the last 100 years as it has without them (Commodities Exchange)”- Chuck Kowalski: renowned Commodities and Futures Professional and President of Stoik Futures Inc. of the United States of America.
The above assertion can serve as a leaked secret of the developmental success recorded by the United States of America through the operations of commodities to the Federal Government to learn from in order to support and encourage the five registered commodity exchanges (NCX, Afex, LCFE, GCMX and Prime Commex) to be fully operational.
Nasiru Aminu-Daneji, mcpn, mcban, fimc
080 3721 7320, 081 7721 7320
Author: COMMODITIES EXCHANGE-Solution to Economic, Security and Social Challenges & Catalyst for Infrastructural Development in Nigeria.